You can’t pay for English whales (the queen owns those), but you should pay summer interns – as employees, not contractors

Whale summer internships paid unpaid employee independent contractorSome things you can’t pay for. All of the whales and sturgeon that live in English waters, for example, belong to the queen. Under an English statute from 1324, “The king shall have wreck of the sea throughout the realm, whales and sturgeons taken in the sea or elsewhere within the realm, except in certain places privileged by the king.”

So if you wanted to buy an English whale this summer, you may be out of luck. U.S. business should be spending their money elsewhere — like on summer interns! Yes, let’s talk about summer interns. Paid or unpaid? Employee or independent contractor? Have I captured your attention? I knew it. Read on.

Paid or unpaid? The rules have been changing to make it easier to have unpaid interns, provided the internships have educational value and are not for the benefit of the business. This post provides some guidelines. The bottom line, though, is that it’s safest to pay your summer interns. Continue reading

Free Bird! Dep’t of Labor Rewrites Test for Unpaid Internships

chicks-2965846_1920Lots of things are free in the world of music. There’s Free Bird (Lynyrd Skynyrd), Free Money (Patti Smith), and according to Dire Straits, you can get your money for nothin’ and your chicks for free.

For the most part, though, you’ve got to pay for your interns. Or do you?

On Friday, the DOL announced it was reversing its 2010 guidance on Internship Programs under the Fair Labor Standards Act. Since 2010, the DOL had been taking the position that unpaid interns are employees and must be paid unless each of six factors were present. Here’s the old DOL fact sheet and six-factor test.

The DOL has now changed course, after four U.S. Court of Appeals decisions rejected the DOL’s test as too strict. The DOL now opted for a balancing test. The balancing test asks whether the intern or the business is the “primary beneficiary” of the internship.

The DOL’s new guidance adopts the same balancing test recently favored by the courts.

Continue reading

Court Rules That Shadowing Dad at Work Might Require Payment

Shadow - Trainee or Employee  death-2577486_1280In the 1930s, the popular radio program The Shadow featured an invisible avenger who possessed “the mysterious power to cloud men’s minds, so they could not see him.” (He supposedly picked up this power in East Asia, which must have seemed mysterious in an era before Kung Pao Chicken was widely available.)

Eighty years later, “shadowing” has a different meaning. An unpaid trainee follows around a more experienced employee as a way to learn the business. Few trainees have mastered the power of invisibility [Note: only the best ones have, and they’re hard to find … ba-dum-bum], and often the nature of being a trainee involves getting in the way of the real work.

Scott Axel was a trainee who shadowed his father at an automobile wholesaler in Florida. He had no expectation of pay, and the business said it would not hire him. As a favor to his dad, the business let him learn the business by shadowing his dad.

Continue reading

Can an Intern be an Independent Contractor? (Answers revealed in James Bond movies)

IMG_1068Among James Bond films, Rotten Tomatoes ranks Never Say Never Again 18th out of 26, with a mediocre 63% rating. (Bond movie quiz at the end of this post, for patient readers.)

It’s a cliche saying, I know, but my first reaction when asked this question was, “I’d never say never, but it’s hard to imagine a scenario where that would work.” (That was also my second reaction and my third. Let’s just say that’s my reaction.)

Let’s run this through the gauntlet. Remember, it’s not your choice whether an intern is an independent contractor or an employee. The law decides that for you, based on the nature of the relationship.

Test #1: Economic Realities Test. Under federal wage and hour laws, an independent Continue reading

Unpaid Internships: Six Tips For Avoiding Minimum Wage Requirements

student unpaid internship frog-1339892_1920It’s summer intern hiring season. Can your interns be unpaid? If you pay them something, can you pay a small stipend that amounts to less than minimum wage?

Wage and hour laws dictate when a summer intern must be paid like a regular employee, with a required minimum wage and eligibility for overtime. Seasonal amusement and recreational establishments (such as summer camps or some amusement parks) may qualify for a special exemption, but this post is focused on more conventional year-round businesses.

Here are six tips for maintaining unpaid internship status: Continue reading

Are You Protecting Confidential Information When Using Independent Contractors? Try These 2 Tips.

confidential information - independent contractors - top-secret-1076813_1920Do your independent contractors have access to confidential information?  Does your independent contractor agreement provide you with sufficient protection?

Tip #1: Be sure your independent contractor agreement includes a Confidential Information section. It should prohibit the contractor from using or disclosing confidential information at any time, including after the retention is completed.

Be sure, however, to consider these carve-outs to allow disclosure under these limited circumstances:

  1. When a subpoena or court order requires, but consider requiring the contractor to provide advance notice so you have the opportunity to contest the potential disclosure.
  2. To a government agency, as part of a complaint or investigation. The SEC and DOL/OSHA have taken the position that it is a violation of federal whistleblower laws to have a Confidential Information clause that is so broad that it prohibits revealing confidential information to a government agency when whistleblowing. Under this whistleblowing scenario, you cannot require the individual to alert you to the disclosure first.
  3. Under circumstances described in the Defend Trade Secrets Act (DTSA), which took effect in 2016. Under DTSA, a company can recover additional damages and attorney fees if an individual improperly discloses the company’s trade secrets if the company provides advance notice to individuals of their DTSA rights.

Here is a sample DTSA disclosure:

You shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made (x) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (y) solely for the purpose of reporting or investigating a suspected violation of law. You shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Furthermore, in the event you file a lawsuit for retaliation by the Company for reporting a suspected violation of law, you may disclose the trade secret to your attorney and use the trade secret information in the court proceeding, if you file any document containing the trade secret under seal and do not disclose the trade secret, except pursuant to court order.

Tip #2: One other point to remember — and this is a common mistake: Make sure that when the agreement expires, the obligation not to disclose confidential information remains in effect. I have seen too many termination clauses where the agreement terminates, not just the relationship. If the entire agreement terminates, you may accidentally be terminating the contractor’s obligation to preserve confidential information after the engagement ends.

When you end an engagement, you probably want to terminate the engagement, not the entire agreement.

Have fun out there!

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.